Back to maths class for the transport secretary

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As regards the fact that the approved fare increase rates do not follow the formula outcome, [Secretary for Transport and Housing Eva] Cheng said when announcing the bus fare adjustment arrangement in 2006, the government already made clear the formula's outcome would not operate as an automatic determinant of the bus fare adjustment outcome.

Government news release

May 20

Today, boys and girls, we explore the wonderfully opportunistic field of creative mathematics, where all numbers are variables dependent on your personal whim alone, a concept best exemplified by government maths.

Take, for instance, the transport department's assertion that its formula for 'supportable fare adjustment rate' yields a figure of 4.67 per cent. This is based on the consumer price inflation from January 2006 to March 2008, and transport workers' wages from the first quarter of 2006 to the fourth quarter of 2007, less a factor for productivity gain.

That January 2006 date was when the formula was last revised and the bus companies last had their fares reviewed. The transport wages benchmark runs only to the last quarter of 2007 because later figures have not yet been published.

How convenient. Let us make two changes. For the CPI let us adopt February 2006 as the starting point because it was midway through the quarter and actually the first full month after the fare review.

And for transport workers let us assume that wages in the first quarter of 2008 went up as much as in the last quarter of 2007, which, given recent wage trends, is a very safe assumption and brings us up to date.

The formula now yields a figure of 6.4, rather than 4.67, after making the productivity adjustment. Ain't it wonderful what you can do with numbers?

And if the transport department wishes to challenge my calculations then I challenge it to revise its own when the first-quarter figures for transport workers' wages are in.

But I shall concede that this is unlikely to make a difference to the bus companies as they didn't get their 4.67 per cent anyway. On a passenger-weighted basis I work the increase out as being only 4.2 per cent.

As Eva Cheng points out, however, the formula does not operate as an automatic determinant of bus fare adjustments. The transport department must take other factors into account including 'public affordability and acceptability'.

This woolly concept was refined with a new guideline in 2006: 'Reference should be made to the magnitude of change in median household income'.

We must assume this was indeed done, as the news release on Tuesday duly noted: 'The monthly median household income has increased 5.7 per cent from the first quarter of 2006 to the first quarter of 2008.'

Two questions for you here, Eva:

No 1 - The statistics show that median monthly domestic household income in the first quarter of 2006 was HK$16,700 and in the first quarter of 2008 was HK$18,500. I make this out to be an increase of 10.8 per cent not 5.7 per cent. Is a calculator insufficiently artistic for you?

And No 2 - If even 5.7 per cent, let alone 10.8 per cent, is higher than the 4.67 per cent indicated by the basic formula, should you not have allowed the bus companies a bigger fare increase than 4.67 per cent rather than imposing a smaller one? For a review of the numeric concepts involved, I refer you to your Primary 2 arithmetic textbook.

But we have more. Our report yesterday quoted an unnamed government source (i.e. slimy rat who won't stand by his or her comments) as defending the fare increases on the basis that they are necessary to maintain a rate of return of 9.7 per cent for the bus companies.

This is a reference to return on average net fixed assets. At anything above 9.7 per cent the bus companies are required to give half of their earnings back to the public.

But, contrary to what the rat implies, it isn't 9.7 per cent at present. For Kowloon Motor Bus last year it was only 6.7 per cent on bus operations and this year will be lower yet, what with rocketing fuel costs and other rising expenses.

I don't have figures for the other bus companies as they do not publish them but it is my guess that they were even lower than 6.7 per cent last year.

And please believe me when I tell you that I am no friend of KMB. These are the villains who introduced that abomination, bus TV, to Hong Kong and drove me off the buses. For that crime alone, I take delight in any discomfiture they suffer.

But I do wish that our bureaucrats would be honest about these things and admit that the real fare-setting mechanism they employ is the fear factor one that pampered public housing tenants might wave placards in their faces and scream slogans along the general theme of The-World-Owes-Me-A-Living.